Twitter, the social media micro-blogging service, just received $100 million in new funding from T. Rowe Price and New York's Insight Venture Partners, according to recent reports.

It's a staggering amount when you think of Twitter's modest beginning as a simple sketch on a legal pad. It is, however, the ultimate dream for entrepreneurs who start on a shoestring, with nothing more than sweat equity and the hope that their ideas gain traction in the wider world.

Twitter's founders were fortunate to start within another privately held firm. But what do you do when all you have is a good idea? What if all you need is a small amount of cash to get website hosting or to purchase raw materials to transform into fabulous products? Is it possible to finance a big dream with a small loan?

The answer is yes, with a microloan.

What's a Microloan?
Loans of $35,000 or less are classified as microloans, although some loan companies have made as much as $50,000 available. Often, the funds are distributed through nonprofit, community-based lenders who obtain the money from the Small Business Administration. The microloan program was initially founded to help startup, newly established or growing small-business concerns. Applications for loans are submitted to the local agency, and it decides whether the funds will be granted. Payment and interest terms vary depending on the size of the loan and the lender.

Microcredit has become a somewhat interchangeable term, although the concept began outside the U.S. to assist borrowers who would not qualify for a bank loan. Microcredit is extended in as little as $20 increments for an impoverished person in a developing country, for a year or less. This credit is not secured by collateral and requires repayment in weekly installments.

Where to Find a Lender
SBA-partnered microlenders are located in 46 of the 50 states, as well as the District of Columbia and Puerto Rico. A full listing of participating lenders can be found on the SBA's website.

Other organizations not affiliated with the SBA extend microloans, such as Kiva, a person-to-person microlending website that facilitates loans to entrepreneurs in other countries. Kiva recently partnered with Opportunity Fund and Accion USA to offer loans to American entrepreneurs. The Opportunity Fund has already made $10 million in loans to San Francisco Bay-area businesses, according to Shaolee Sen, director of marketing and communications.

Local economic development organizations are also a good resource for funds. David Olson, CEO of FreeStride Therapeutics Inc., a biotech startup based in Ann Arbor, Mich., obtained a loan from the Michigan Economic Development Corp., which was facilitated by the local business accelerator, Ann Arbor SPARK.

Who Can Apply
It would be great if the criteria for a loan were just a wing and a prayer. Sen points out that Opportunity Fund does help candidates who "lack access to capital and have little or no credit or a new business that cannot qualify for a bank loan and wants an alternative to a credit card." That does not mean you can get by with a poor history. Opportunity Fund will not consider applicants with bankruptcies within the last year, open tax liens or outstanding judgments.

Ann Arbor SPARK has similar parameters but is looking for startups that have "passed the concept development and analysis phase, and have very specific needs to achieve commercialization milestones to meet the requirements of an investor or to close initial sales." Skip Simms, director of business accelerator services and manager of Michigan Pre-seed Capital Fund and Ann Arbor SPARK, adds that candidates who have a few customers or pending sales that need some working capital to close those sales, build product or ramp up production are more likely to be considered.

Also, candidates for loans from any microlender need to have their business based in the state or area served by the lender.

How to Increase the Chance of Getting a Loan
Even at the micro level, Harold Aughton says entrepreneurs must have a well-thought-out idea before approaching a lender. Aughton, chief operating officer of Earthtone Greetings, recently received a microloan of $25,000 from Bridegway Capital. He says he and his wife developed an idea to make sending greeting cards simpler. Starting with Aughton's own nature photography and skills as a programmer, the couple used their personal savings to get started. But Earthtone Greetings needed another small capital infusion to keep growing.

Aughton says the loan officer at Bridgeway Capital evaluated everything from the couples' education to the potential market for their service. It helped that the greeting card business currently accounts for more than $7.5 billion in annual retail sales. "If I could get a half a percent of that market, that is pretty significant for a small business," Aughton says.

Simms advises that the next step is to have a well-thought-out business plan. "We don't, at this stage of a company's life, expect a fully baked plan, but we need a plan that gives us confidence the entrepreneur has thought through all the issues," he says.

Additionally, candidates for SPARK loans need to provide a balance sheet and budget for the next few years. Simms says that is to ensure that the business owner understands the financial demands he or she will be facing and how the owner plan to address them.

How to Use the Loan
The Aughtons will use their microloan funds to get their website from beta-test phase to an open-for-e-commerce site. Aughton says it will also help them market their service to printers as well as individuals.

SBA loans can only be used only for "working capital and acquisition of materials, supplies, furniture, fixtures and equipment. Loans cannot be made to acquire land or property." Simms also cautions not to consider asking for loans to cover operating expenses, such as salaries. "The companies we will loan to are still in bootstrapping mode and need to use cash to generate sales. Don't use our loan to pay off other loans, either," he says.

A microloan can also be used to purchase something intangible, like confidence, Olson says. Once a company secures a loan, it is much more likely to attract subsequent funds. "FreeStride Therapeutics Inc. is developing a new drug to treat lameness in horses. The company plans to begin clinical studies later this year," he says. "We plan to use the data we will collect using the microloan to secure follow-on private investment."